EXHIBIT 10.6
PETROGEN LOGO APPEARS HERE
PETROGEN
FARM- IN AND ACQUISITION AGREEMENT
TO: CORONADO OIL COMPANY, located at 0000 Xxxxxx Xxxx Xxxxxxxx, 000 00xx
Xxxxxx, Xxxxxx, Xxxxxxxx 00000, ("Coronado")
FROM: PETROGEN, INC., located at Greenway Plaza, 0000 Xxxxxxxxx Xxxxxxx,
Xxxxx 0000, Xxxxxxx, Xxxxx 00000 ("Petrogen")
DATE: December 31st, 2002
RE: Farm-in and Acquisition of a 100% Working Interest (the "WI") and a 77.6%
Net Revenue Interest (the "NRI"), of the Xxxx Creek Field Project
comprised of the following:
Township 46 North, Range 100 West, 6th P.M.
Section 23: SE/4
Section 25: NE/4, W/2SE/4
Section 35: SE/4NE/4, Hot Springs County, Wyoming, (the "Land")
Otherwise referred to as the Federal Oil & Gas Lease # WYW-351O2, (the
"Lease"), which includes the Xxxxx Government #1, #2 and #3 well-bores
(the "Well-bores").
The Land, the Lease and the Well-bores are hereafter collectively
referred to as the "Property".
A. REPRESENTATIONS AND WARRANTIES
1. The Assignor represents that It Is in control of 100% of the legal and
beneficial ownership OF me Project and that there are no liens,
encumbrances, third party rights OR options, or any other imposition on
title or ownership or use of the same or the fruits thereof of the Property
except as may be imposed by laws of general application. The /Assignor
represents that it is the owner of (he lands, assets or rights listed
hereto in Schedule "A' (and such is a full and complete list without
exception) and is the 100% legal and beneficial owner thereof and that
there are no debts, liens, encumbranches, third party rights or options, or
any other imposition on Hie Property (except 35 listed in Schedule "A" and
such is a full and complete list without exception) or to its use of the
fruits thereof or to any of its assets except as may be Imposed by laws of
general) application,
B. FARM-IN AND ALIGNMENT OF THE PROPERTY
1. Petrogen shall have the right upon its best efforts in good faith and in a
prudent and diligent manner to commence Operations to perform the necessary
work to attempt to put any formerly producing PAY zones within the
vveH-borea back into the condition of production and/or put any potential
behind-pipe hydrocarbon pay zones within the Well-bores into production
((he "Recomplete*, "Recompletion*, or "Recompletions").
2. Coronado shall receive 60% of the revenues derived from production from the
Well-bores, net only of royalties including but not limited to Federal
royalties (12.5%), royalty interests of record as of the date of this
Agreement (5%); and the Overriding Royalty (the "ORRI") reserved herein to
Coronado (5%), to an aggregate amount of $75,000 (the "Production
Payment"). Petrogen reserves the right, but not the obligation, to pay in
advance any amount of the balance outstanding of and upon the Production
Payment at any time.
3. At such time as Coronado has received the entirety of the Production
payment, or, at such time as Petrogen has attempted the recompletion at
least two (2) of the well-bores, Coronado shall within tan business days
thereafter, convey to Petrogen one-hundred percent (100%) of Cononado's
record title and operating rights and interests {the "interests") in and to
the Property, the assignment of which shall be delivered to Petrogen as the
then Wyoming Bureau of Land Management (the "BLM") approved Operator of the
Property, reserving to Coronado an exclusive five percent (5%) ORRI
proportional to that of Petrogen's net WI upon the Property, which shall
not bear any of the costs of production as defined in the Wyoming Statute
30-5-304, and Petrogen shall compfy with the Order of the Authorized
Officer stated in the BLM extension letter dated January 6th, 2003,
4. After Xxxxxxxx xx$ received the entirety of THE Production Payment,
Petrogen shall thereafter receive one hundred percent (100%) of all the
income derived from hydrocarbon production from the said Well-bores until
such time as Petrogen has recouped the total of its expenditures (the
"Recoup" or "Recoupment") to Recompute the Well-bores, Including, but not
limited to, the costs for testing, completion, recompletion, reworking,
Production Payments, etc., and associated operating expenses and overhead.
5. Coronado shall reserve the right, but not the obligation, for a period of
twelve (12) months after Petrogen's Recoupment, to convert its retained
ORRI to a fifty percent (50%) WI in the said Well-bores, in (hat instance,
Petrogen's interest in the Well-bores shall convert to a 50% WI of an 82.5%
NRI.
6. Petrogen agrees that it shall spud at least one new Frontier well-bore upon
the Lease (the "New Well") no later than November 1U, 2004 (the
"Performance Date"), Petrogen shall provide Coronado a written notice of
its Intention to commence the New Well, and Coronado shall inform Petrogen
within a period of thirty (30) days thereafter (the "Notice Period*) of its
intention to elder participate in the New Well OR to not participate in the
New Well.
7. If Coronado elects to participate in the New Well, Coronado's retained ORRI
upon (he Property in regard to THE New Well shall convert to a 50% WI of an
82.5% NRI.
8. If Coronado elects to not participate in the New Well within the Notice
Period, or, defaults upon payment to Petrogen of its proportionate share of
the costs associated with the New Well, Petrogen will then commence the
New Well without the participation of Coronado, and, In that instance,
Petrogen Will then retain a 100% WI of a 77,6% NRI on ail Hydrocarbon
developments and production revenues until such time it has recouped its
expenses.
9. Coronado reserves the right, but not the obligation, for a period of twelve
(12) months after Petrogen's Recoupment from the New Wed, to convert its
retained ORRI to a fifty percent (50%) WI in said New Well. In that
instance, Petrogen's interest IN the New Well shall convert to a $0% WI of
an 82.6% NRI.
10. Should Petrogen elect to not proceed with the spudding of one New Wed upon
the Property by the Performance Date, Petrogen snail convey to Coronado one
hundred percent (100%) of Petrogen's Interests in and to the Property,
however, reserving Petrogen's Interests In and to the Well-bores and the
production unit of each Well-bore it has Recompleted.
C. AREA OF MUTUAL INTEREST
1. Petrogen and Coronado agree to the formation of an Area of Mutual Interest
(the "AM!"} comprised of Sections 23, 24, 25, 26, 35 and 36 of Township 46
North, Range 100 West, as well as the lands covered within Sections of the
Property, but that are not currently under leasehold within the composition
of the Property, Petrogen and Coronado agree to work in collaboration to
acquire leasehold interests within the AMI.
2. Petrogen shall pay and bear one hundred percent (100%) of the costs
associated with acquisition OF leasehold and other interests (the
"Leasehold") within the AMI.
3. Petrogen reserves the right to decline acquisition of any and all interests
within the AMI if favorable acquisition terms cannot be reached
between Petrogen and the current mineral or lease owners and/or lease
title holders within the AMI.
4. Upon Petrogen having compiled acquisition of any Leasehold Interests within
the AMI, Petrogen and Coronado will WORK in collaboration to ascertain the
most geologically advantageous locations to spud two (2) new
Frontier Formation tests (the "Frontier Xxxxx") within the AMI. Petrogen
reserves me right to the final decision as to the location of where
the Frontiere Wellsfls will be located.
6. Petrogen shall receive from either one of, or Both of the Frontier Xxxxx it
drills and completes, one hundred percent (100%) of the income derived from
hydrocarbon production until such time as Petrogen has recouped the total
of its expenditures, including, but not limited to, the coats FOR drilling,
testing, completion, etc., and associated operating expanses, with the
assignment of a two and one half percent (2.5%) ORRI (tne 2.5% ORRI) to
Coronado, which shall not bear any of the costs of production as defined In
the Wyoming Statute 30-5-304.
7. Coronado shall reserve the right, but not the obligation, for a period of
twelve (12) months after Petrogen's Recoupment, to convert its retained
2,5% ORRI to a twenty five percent (25%) Wl In the Frontier Xxxxx and the
associated leasses upon Petrogen's Leasehold within the AMI.
8. Through its acquisition efforts within THE AMI AS noted, Petrogen reserves
the right to attempt to acquire (he American Petrofina well-bore (the
"APW").
9. Upon Petrogen's receipt of an assignment upon the APW, Petrogen will
attempt the Recompletion of the APW all costs of which shall be borne
solely by Xxxxxxxx.
00. Xxxxxxxx shad receive) one hundred percent (100%) of the income derived
from hydrocarbon production from the APW until such time as it has Recouped
the total of Its expenditures to Recomplete the APW, including, but not
limited to, the costs for testing, completion, recompletion, reworking,
etc., and associated operating expenses, with the assignment of a 2.5% ORRI
to Coronado, which shall not bear any of the costs of production as defined
in the Wyoming Statute 30-5-304.
11. Coronado shaa reserve the right, but not the obligation, for a period of
twelve (12) months after Petrogen's Recoupment, to convert its retained
2.5% ORRI in the APW and tha associated leases upon Petrogen's leased
interests within tho AMI respective of the APW to a twenty five percent
(25%) WI.
D. GENERAL MATTERS
1. The parties warrant employing good faith, due diligence, and best efforts
in the performance of this agreement In the event of any dispute, the
parties shall employ the term* hereof (or of any further or collateral
agreements) and terms standard in the Industry where not addressed by
agreements.
2. This agreement shall be kept confidential and no disclosure of the same
shall be made without mutual consent, which shall not be unreasonably with
held.
3. Petrogen and Coronado shall enter a mutually agreeable operating agreement.
4. Petrogen shall maintain adequate liability Insurance, a proof of which
shall be furnished to Coronado poor to the commencement of operations.
5. The Situs of this agreement shall be governed by the laws of the State of
Colorado.
6. This agreement supercedes all previous agreements between Coronado and
Petrogen, whether oral, written, expressed or implied.
We trust that the foregoing terms are acceptable to you we ask that you execute
and return a copy of this LOI and the same will be binding upon us from the date
of your acceptance.
Yours truly,
PETROGEN. [NC.
/s/ XXXXX X. XXXXXXXX
__________________________________
Xxxxx X. Xxxxxxxx - President, CEO
__________________________________
Witness
The foregoing is hereby agreed effective this 3rd day of February, 2003.
CORONADO OIL COMPANY
/s/ XXXX XXXXXXXXXXXX
__________________________________
Xxxx Xxxxxxxxxxxx - President
/s/ XXXXXX X. XXXXX
__________________________________
Witness
